Bank Reconciliation (Date)

Cash balance per bank statement Add: Deposits recorded by business but not by bank (e.g., deposits in transit) XX Less:Charges recorded by business but not by bank (e.g., outstanding checks) XX $ XXX $ XXX Adjusted cash balance per bank Cash balance per books Add: Deposits recorded by bank but not by business (e.g., note collection, interest) Less:Charges recorded by bank but not by business (e.g., service charges, NSF checks) Adjusted cash balance per books $ XXX

ILLUSTRATION 8-5 BANK RECONCILIATION FORMAT

Copyright 2006 John Wiley & Sons, Inc.

Differences Caused By 1. Time lags 2. Errors

Weygandt/Financial Accounting 5e

Balances Should Agree

XX

XX $ XXX

Prepare Adjusting Entries To Correct Books

56

ILLUSTRATION 8-6 PREPARING THE BANK RECONCILIATION

Bank Statement
Bank balance June 1 . . . . $10,000 Deposits and credits June 1 June 10 June 20 June 25 June 28 200.00 350.00 425.00 750.00 CM 320.00 Checks and debits

Books
Book balance June 1 . . . . $10,150 Cash Receipts June 10 $ 350.00 June 20 425.00 June 28 320.00 June 30 275.00 Total $1,370.00 Cash Disbursements

#209 #210 #211 #213 #216 #217 #218 #219 #220 NSF S.C.

10.00 25.00 52.00 199.00 205.00 650.00 200.00 125.00 250.00 125.00 6.00

Total credits $2,045.00 Total debits $1,847.00 Bank balance June 30 . . . . . $10,198

#210 #211 #212 #213 #214 #215 #216 #217 #218 #219 #220 #221 #222 #223 Total

25.00 52.00 22.00 199.00 void 29.00 205.00 560.00 200.00 125.00 250.00 60.00 126.00 82.00 $1,935.00

Bank balance June 30 . . . . . $9,585

CMRepresents $725 Note Receivable collection plus interest revenue of $50 less bank charges of $25. NSF represents $125 check from ABC Company deposited on 6/20.

May Bank Reconciliation Balance per bank statement Add: Deposits in transit

$10,000 200 10,200 $40 10

HINT: One error was made in recording disbursements.

Less: Outstanding checks #201 #209 Adjusted balance per bank

50 $10,150

Procedures for Finding Differences between Bank and Book Balances: 1. Examine last month's bank reconciliation and list items that have not changed, i.e., outstanding checks from prior month which have not cleared (again) or other reconciling items which were not corrected (bank service charges). 2. Compare all recorded disbursements per books to bank debits (charges) and list differences. 3. Compare all recorded receipts per books to bank credits and list differences. 4. Prepare bank reconciliation from data collected.

Copyright 2006 John Wiley & Sons, Inc.

Weygandt/Financial Accounting 5e

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ILLUSTRATION 8-6 (Continued) PREPARING THE BANK RECONCILIATION

June Bank Reconciliation
Balance per bank Add: Deposit in Transit: June 30 Less: Outstanding checks #201 $ 40 #212 22 #215 29 #221 60 #222 126 #223 82 Adjusted balance per bank Balance per books Add: Bank collection of N/R Less: NSF (ABC Co.) $125 Bank service charge 6 Error: Check #217 90 Adjusted balance per book $10,198 275 10,473

359 $10,114 $9,585 750 $10,335

Prepare adjusting entries to adjust cash balance per books to adjusted balance per book

221 $10,114

Bank Reconciliation Adjusting Entries

Bank collects a $725 Notes Receivable and $50 Interest Revenue less $25 for bank charges (net $750). 750 Cash 25 Miscellaneous Expense Interest Revenue 50 Notes Receivable 725 Book error of $90 resulted from recording check No. 217 as $560 when actual check amount and invoice amounted to $650 (XYZ CompanyAccounts Payable). Accounts PayableXYZ Company Cash Bank service charges of $6. Miscellaneous Expense Cash NSF check for $125 from ABC Company returned by bank. Accounts ReceivableABC Company Cash
Copyright 2006 John Wiley & Sons, Inc.

90 90

6 6

125 125

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F08_12

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Weygandt Financial Accounting 5e / F08_12 Chapter 8 - Internal Control and Cash Image Gallery

F08_12.jpg

file://H:\UC Davis Extension Accounting Program\UC Davis Extension Documents\Fall 2...

11/2/2006

Dan's Guitar Shop Petty Cash Reimbursement Detail For The Month of __________________ Item
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Total

Description
Purchases (Direct Materials) Office Supplies Supplies Small Equipment (<$500) Meals Printing and Copying Postage and Shipping Repairs and Maintenance

GL Code
5010 6460 6660 6670 6440 6520 6500 6680

Amount

ILLUSTRATION 8-4 PETTY CASH FUND

Petty Cash Fund Entries

To establish $100 Petty Cash fund (Cash check for $100).
Petty Cash Cash 100 100

To replenish Petty Cash (Freight-in $40, Supplies $30, and cash count of $25) to $100.
Freight-in Supplies Expense Cash Over and Short Cash ($100 $25) 40 30 5 75

Internal Control Features

PRINCIPLES
1. Establishment of responsibility. 2. Segregation of duties.

APPLICATION TO PETTY CASH

Appoint a petty cash custodian.

Custodian of petty cash fund makes payments from fund. Treasurer's office reviews petty cash receipts and other documentation before replenishing fund. Prenumbered cash receipts signed by fund custodian and the individual receiving payment. Locked petty cash box or drawer.

3. Documentation procedures. 4. Physical, mechanical, and electronic controls. 5. Independent internal verification.

The treasurer's office examines petty cash receipts and supporting documents to verify proper expenditures before replenishment of fund. Surprise count of cash on hand plus receipts made by internal auditors. Cancelling paid receipts so that they cannot be resubmitted.

6. Other controls.

Copyright 2006 John Wiley & Sons, Inc.

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UC Davis Extension Financial Accounting Bank Reconciliation Form

Balance Per Bank Add: Deposits in Transit

Date

Amount

Subtotal Less: Outstanding Checks: Check Number Amount

Adjusted balance per bank Balance per books Add: Bank Adjustments Less: Bank Adjustments

Adjusted balance per books